EU Carbon Market Main Hurdle to Aviation Deal, India Says

Oct. 1 (Bloomberg) -- The European Union’s plan to keep its
curbs on pollution from airlines is the main hindrance to an
international agreement on a carbon market for the industry,
according to a senior Indian official.

An accord discussed by the International Civil Aviation
Organization shouldn’t authorize EU measures prior to the global
deal unless they are mutually agreed with other states, said
Prashant Sukul, India’s representative to the United Nations
agency. Envoys from more than 190 countries meeting in Montreal
are trying to iron out differences over the first-ever
commitment to a carbon tool for the $708 billion industry.

“It’s all boiling down to whether this body can give
sanction to unilateral measures,” Sukul said in an interview
yesterday. “Any scheme that starts in the interim will work
against a future global system.”

The ICAO general assembly is due to decide this week
whether to back a pledge to agree on the details of a global
carbon-reduction program for airlines in 2016 and start the
system by 2020. A potential deal, a precedent for a single
industry worldwide, would help avert a trade war between the 28-nation EU and other regions over carbon-reduction policies.

The creation of a greenhouse-gas market for airlines made
it to the agenda of the UN agency’s triennial assembly after the
EU included airlines in its emissions-trading system beginning
in 2012. Europe, which wants to lead the global fight against
climate change, said it decided to act after aviation emissions
in the region doubled over two decades.

Draft Deal

Under a draft deal recommended by a majority of states in
the 36-nation ICAO Council last month, the EU would be allowed
to continue its program in a limited form in exchange for a
global pledge to facilitate an international market. The
proposed resolution, which would give the EU the right to impose
pollution curbs on airlines in its own airspace, is unacceptable
to some member states, according to Sukul.

“Any regional scheme to be implemented in the interim
should be based on mutual agreement,” he said.

Nations that oppose any European greenhouse-gas limits on
the industry prior to a worldwide agreement also include Brazil,
Russia, China, Cuba and Saudi Arabia, according to an EU
document on the talks obtained last month by Bloomberg News.
They argue the EU carbon curbs violate the Chicago Convention,
which governs international aviation. The EU Court of Justice
rejected such views in 2011, ruling that the region’s program
doesn’t violate the principle of territoriality or the
sovereignty of third states.

‘Hot Air’

Effective market-based measures combined with the aviation
industry’s goal of carbon-neutral growth are needed to reduce
the global-warming impact from airlines, according to a study by
the Manchester Metropolitan University.

“Even the modest goal of carbon-neutral growth by 2020
will be impossible to achieve without a market-based measure as
effective as the EU ETS, which Europe has been pressured to
weaken,” Tim Johnson, director at the Aviation Environment
Federation, said in an e-mailed statement. “The international
aviation community says it is serious about combating the harm
its industry does to the climate -- now it must act to show
these words are more than just hot air.”

To help broker a compromise in ICAO, the U.S. is working on
changes to the draft text, said two people familiar with the
matter who asked not to be identified, citing policy.

U.S. Position

“The U.S. position is somewhat close to us on key
elements,” Sukul said without elaborating. “They are still
forming it and consulting other member states. That’ll take some
time.”

A failure by the UN agency to reach a deal risks trade
conflicts between Europe and other regions, EU Climate
Commissioner Connie Hedegaard said last week. The bloc’s freeze
of emissions-trading obligation for international flights,
enacted to facilitate global talks, will automatically expire
next year. That would mean the system returns to its original
design, where aviation discharges were limited at the entire
length of routes to and from the region’s airports.

“It’s up to the EU if they want a trade war,” Sukul said.
“If they start it, there will be one. There’s already been
retaliation of ideas. If they think ICAO can be bulldozed, do
you think ICAO states can keep quiet?”

Any legislation to limit the scope of the EU emissions
program or to extend the suspension on foreign flights would
require consent by the bloc’s governments and the European
Parliament. The assembly is unlikely to approve any new
concessions if ICAO weakens the draft deal, Peter Liese, a
German deputy to the EU Parliament, said Sept. 24.

“If the European Parliament wants to restart the clock,
they will still have major countries not complying,” Sukul
said.